After IRS reform, you will still pay taxes Congress: Near-unanimity for kinder, gentler revenue collection, but more effective, too.

July 14, 1998

AN ELECTION-YEAR reform of the Internal Revenue Service, which passed the House and Senate nearly unanimously and will be signed into law by President Clinton, is welcome news for American taxpayers. It is also oversold.

Everyone will still have to file income tax returns, still have to pay taxes, still face penalties -- and possible criminal charges -- for evading them. Despite efforts to simplify them, the forms will remain complex. And Congress will still tinker with the tax code, making it more complicated every year.

The bill reflects a long and valuable process of examining the Internal Revenue Service, looking for ways to change its culture from an enforcement to a service agency.

Along the way came revelations at Senate hearings of serious abuse by unknowing or uncaring IRS underlings and of mammoth inefficiencies and incompetence by top officials of the agency.

The new law will give the IRS 18 months to dispute a return. After 2004, the agency will have one year to raise questions, or interest and penalties will be reduced. The interest rate the government will pay on refunds will increase to equal the interest to be paid by taxpayers who owe back taxes. In the most ballyhooed reform, the burden of proof in most tax court cases will shift from the taxpayer to the IRS. In another advance, divorced spouses will no longer be liable for their former mates' omissions with which they had nothing to do.

Perhaps the most commendable feature is Congress' unaccustomed willingness to reform itself. The bill requires Congress to analyze proposed changes in the tax code and allows the IRS to assess the costs of collection. Previously, Congress just passed changes that sounded good without wanting to know the impact.

An outside oversight board will review operations and management. It could be years before the full effects of a kinder and gentler IRS are felt.

As with so many touted reforms, this one will cost taxpayers billions of dollars that are collected now. Senior management positions will be created at high salaries as well. The important caveat is that the new, improved Internal Revenue Service still has the prime responsibility of collecting the taxes that Congress enacts.

Tax evasion adds to the burdens of honest, law-abiding residents of the United States who pay up on time. If evasion should increase under the new rules, it is reasonable to expect a future tightening and a retreat to tougher enforcement. The tax bill always must be paid. Congress did not do away with that.